Retail prices return to seasonal norms as rising used car demand sparks sales uptick

According to the latest data from Auto Trader, the used car market recorded very robust levels of consumer demand, speed of sale, and transactions in May. As a result of the strong underlying health of the used car market, average retail prices have returned to seasonal trends, softening -0.7% on a month-on-month (MoM) and like-for-like basis. Apart from the pandemic influenced 2020 and 2021, retail prices have dipped every May following an April¹ uptick since Auto Trader first began tracking retail prices in 2011.

Demonstrating the strength of the used car market, Auto Trader recorded nearly 83 million visits to its platform in May, which is an increase of circa 11% on the same period last year, and an almost 20% rise since May 2022. Increased engagement is being driven by growing levels of consumer demand, which according to Auto Trader’s data, rose 8.6%² year-on-year (YoY) in May.

Current demand is further highlighted by the current speed at which used cars are selling. It took an average of just 29 days for a used car to sell in May, which is one day slower than in April, but one day faster than the same period last year. Highlighting the nuance of the retail market, cars sold even faster within certain segments; for example, volume brands took an average of 27 days to sell, whilst 3-5-year-old cars left retailers’ forecourts in just 26.

Although down slightly on the 9% YoY increase recorded in April, Auto Trader’s retail sales data indicates used car transactions rose an otherwise significant circa 6% last month, fuelled by the very robust demand in the market.

Supply softens as middle of market squeezed

Following eight months of growth in used car supply, the volume of stock in the market fell -1.1% in April. This downward trend continued into May, with supply levels falling -2.2%, marking the largest drop since last June. Again, highlighting current nuance, whilst supply in some segments remains strong, particularly at opposing ends of the market, overall levels are being hampered by the squeeze on the middle of the market. Indeed, stock for cars less than a year old rose 39% YoY, and nearly 12% for those aged over 10 years old. However, as the circa 3 million ‘missed’ sales during the pandemic continues to flow through the market, supply of 1-5-year-old stock fell -17.3% YoY.

This softening in supply, coupled with rising levels of consumer demand, is creating very favourable market dynamics, which is ultimately what’s helping retail prices return to seasonal norms. Auto Trader’s Market Health metric, which assesses potential market profitability, rose to 11% in May, up from the 10% recorded in April. It marks the highest rate of growth since July 2023. For stock aged 1-5-years-old, it’s rocketed 36% YoY.

Despite these favourable market conditions, however, many retailers are choosing to price very high-demand stock below their market value. Collectively, 9,000 retailers are currently advertising around 70,000 cars with a high Retail Rating score³ below their market average. This behaviour is eroding retailers’ margins, potentially costing around £35 million, or circa £4,000 per retailer.

Commenting, Richard Walker, Auto Trader’s Data & Insights Director, said: “We’ve seen a very robust used car market so far in Q2; retail prices are stabilising, demand is healthy, cars are selling quickly, and critically, transactions are above where they were last year. Any slight month-on-month softening in prices is entirely seasonal. The market is being boosted by economic green shoots, with consumer confidence rising in the wake of falling inflation and anticipation of further tax cuts on household budgets. There may be some disruption in July with the Euros and General Election, but the impact on car buying will be temporary, and our outlook for the year ahead remains positive.”

Sue Robinson, Chief Executive of the National Franchised Dealers Association (NFDA), added: “The used car market is displaying remarkable resilience, with May seeing a notable uptick in demand and sales. It’s reassuring to see cars are selling quickly, whilst retail prices remain stable. These indicators collectively highlight a robust market, providing optimism for the months ahead as we enter the second half of the year.” 

Top 10 used car price growth (all fuel types) | May 2024 vs May 2023 like-for-like

Top 10 used car price contraction (all fuel types) | May 2024 vs May 2023 like-for-like